The Calm With Japan

May 1, 1996

Ebbing trade friction between the United States and Japan could be a sign of a maturing relationship. It could also indicate that American and European industries no longer worry that much about Japan and are focusing attention on the real Asian giant, China.

Or it may reflect shifts in the Japanese economy, with trade surpluses declining as the yen strengthens and government policies shift toward opening domestic markets to foreigners.

All these elements, and others related to joint security interests, are helping to ease a relationship that only a year ago seemed headed toward the shoals over trade. Remember the blow-up over automobile parts? The US threatened to slap punishing tariffs on Japanese luxury cars if Tokyo didn't agree to a "voluntary" plan to increase the use of US-made auto parts. That noisy affair seemed destined for World Trade Organization arbiters, though some feared that the just-formed body was hardly ready for such a test.

The fact is, sales of both American and European cars are sharply up in Japan. And Detroit, far from reeling from Japanese competition, is more concerned with keeping up with the demand for its products.

This doesn't mean that other issues won't arise. Color film is bubbling as a trade controversy, though it's far from clear how good a case American manufacturers can mount. Fuji Film certainly dominates the $15 billion Japanese consumer film market, but its American competitor, Kodak, reportedly has sales of about $1 billion there. Kodak pleads that nontariff barriers are keeping it from netting more sales. The chances of the US government making this case another face-off with Japan are almost nil.

Other looming issues are services, such as insurance, and semiconductors. On the latter front, it's worth noting that in the last quarter, 30 percent of the semiconductors used in the Japanese market were foreign-made. That's considerably ahead of the target set by international agreement.

Japan still presents problems to US businesses wanting to make money there. Its protectionist culture is changing, however, and the hottest trade battles are likely to move elsewhere. To China, for instance, where the pirating of American entertainment and intellectual properties could prove even tougher to crack than the old impasse with Japan over cars.